The Hindu Business Line : De Beers hikes rough diamond prices by 3 pc

DE BEERS' Diamond Trading Company (DTC) has hiked rough diamond prices by an average of 3 per cent in most categories with effect from January 12-16, 2004 sight, according to Rapaport Diamond Report.

The price increase reflects the underlying supply and demand situation for rough diamond.

Demand for diamond jewellery improved in the second half of 2003 and expectations are for healthy growth in 2004, as per an announcement by the company.

In addition, the decline in the dollar over the last six months has had a significant impact, decreasing the price of diamonds for consumers and increasing the cost of mining.

The Japanese yen, the currency used in the world's second-biggest diamond market after the US, climbed 12 per cent against the dollar over the past year. The euro has gained 23 per cent.

The dollar's drop has also raised costs at De Beers' biggest mines in South Africa, Botswana and Namibia because it pays most expenses in local currency and sells gems for dollars. The rand and the Namibian dollar have gained 28 per cent against the dollar over the past year, while the Botswana Pula has risen 22 per cent.

"Indian sightholders are uneasy about the 3 per cent hike in the price of rough announced by the DTC even though the hike was long expected. They are uncertain as to how much polished prices will increase in response to this or whether they will go up at all," the report said.

Most sightholders feel that they are trapped in a price squeeze and that they are no longer able to plan their business strategies for the year because they don't know if there will be more rough price hikes in the coming months.

Non-sightholders, on the other hand, welcome the prospect of polished prices rising and the premium on DTC rough in the market disappearing," report added.

De Beers, which is 45 per cent owned by Anglo American Plc, sold $2.92 billion worth of gems in the first six months of 2003, contributing $248 million to the London-based mining company's profit, more than any other unit aside from forest products. De Beers will announce its full-year sales and earnings on February 5.

Fourth-quarter diamond consumption is expected to match or exceed the figures for the quarter the year earlier, when sales rose from 2001, De Beers said, without providing additional details. Diamond prices climbed 10 per cent last year.